Friday’s downside miss for the September 2025 CPI print keeps expectations in place for 2 more cuts in what remains of calendar 2025.
As a reminder, the consensus was expecting a .3% MoM print, and the unrounded result was .227%.
Pinebrook’s core PCE projection for September of .21% MoM is still in play and will generate a 2.84% YoY level.
This is the noise, and investors should ignore it at this point. The forward policy issue that the Fed is confronting is one of mild, non-recessionary stagflation.
Recall the classic stagflation conditions:
Above target inflation.
Low or negative real economic growth.
High unemployment.
What makes a classic stagflation difficult to deal with is that the policy response to address one of the above results in a worsening of one or two of the other conditions. Stagflation is the ultimate policy quagmire.
However, this is not your granddaddy’s stagflation from 1975.